The document discusses the meaning, nature, and characteristics of a company. It defines a company as an incorporated legal person with a separate legal personality from its members. Some key points: 1) A company is created by law and is regarded in law as a separate legal entity that can sue, own property, and be sued. 2) It has limited liability for its members, perpetual succession regardless of changes to its membership, transferable shares, and a common seal. 3) The document outlines various theories of corporate personality and discusses circumstances where the veil of incorporation may be lifted, such as for fraud, tax evasion, or to serve public interest.

1. PRESENTED BY:
MS. PRIYANKA CHOUDHARY
ASSTT. PROFESSOR (SS),
DEPARTMENT OF LAW, SCIENCE & TECHNOLOGY,
UPES SCHOOL OF LAW.
MEANING, NATURE AND CHARACTERISTICS OF COMPANY

2. 2
INTRODUCTION
Company is an incorporated legal person having a distinct
personality distinct and separate from the member constituting it.
It owes its existence from an act of parliament or any other special
act.
A company is a combination of both natural and artificial person

3. 3
MEANING OF “COMPANY”
Latin word
‘Com’- with or
together
‘Panies’- bread

4. 4
DEFINITION OF “COMPANY
• “An association of many persons who contribute money or money’s worth to a common
stock and employ it in some trade or business and who share profit and loss arising there
from. The common stock so contributed is denoted in money and is the capital of the
company. The persons who form it or to whom it belongs, are members. The proportion of
capital to which each member is entitled is his ‘share’.”
Lord Justice Lindley
• “Company means a company incorporated under this Act or under any previous
company law.”
S. 2 (20), Companies
Act, 2013
• A company is an artificial person created by law, having separate entity, with a
perpetual Succession and common seal.
Prof. Haney

5. 5
• An institution or body incorporated under Companies Act,
2013 or Any Previous Law.
• Determines the existence from any Act of Parliament or
Special Legislation.
AN INCORPORATED
ASSOCIATION
• Company Exists only in contemplation of law.
• Though a juristic person but does not possess a body of
natural being.
• It is invisible, intangible and exists only in the eyes of law.
ARTIFICIAL LEGAL
PERSON
NATURE AND CHARACTERISTICS OF COMPANY

6. 6
NATURE AND CHARACTERISTICS OF COMPANY
SEPARATE LEGAL
ENTITY
Bears own name and
Seal and acts under
corporate name
Distinct & separate
assets from members
Different person from
members
Incorporation- act of
forming legal
corporation as juristic
person

7. 7
CASE LAWS
House Of Lords , England
• Saloman v. Saloman & Co Ltd
(1897) AC 22
• Lee v. Lee’s Air Farming Ltd.
(1961) AC 12 PC
Indian Courts
• Kandoli Tea Co. Ltd, re, ILR (1886)
13 Cal 43
• Shiromani Gurdwara Prabandhak
Committee v. Shri Sam Nath Dass
AIR 2000 SCW 139
• K.M. Basheer v. Lona Chackola
(2003) 115 Comp Cases 127 (Ker.)

8. • Company bound by its own liabilities
• Members’ liability restricted to nominal value of
shares subscribed or guarantee undertaken
• Co. vis-à-vis partnership
Limited liability
• Can’t be incapacitated by illness/death
• Death, insolvency or retirement of members
doesn’t affect co.
• “King is dead, long live the king”
Perpetual succession
• Co.- owns, enjoys, disposes property in its own
name
• Property of co. not the property of shareholder
Separate Property
NATURE AND CHARACTERISTICS OF COMPANY

9. • Object of joint stock co.s: share transferability
• S.44- Shares are movable property, transferable
in manner provided in AoA
• Co. vis-à-vis partnership
Transferable Shares
• Body corporate: can sue and be sued
• Criminal complaint: to be filed by natural person
• Co. may sue for defamatory remarks affecting
business
Capacity to Sue and be
Sued
• Documents bearing its signature
• Common seal: official signature of co.
• Safe custody
Common Seal

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CORPORATE PERSONALITY
“The company’s liabilities
are the legal responsibility of
the company and the
members will not be liable
for the company’s debts”

11. PERSON V. CORPORATE PERSONALITY
“Person” derived from Latin word “persona” which meant a mask worn by
actors playing different roles in the drama.
Until the sixth century the word was used to denote the part played by a man
in life. Thereafter, it began to be used in the sense of a living being capable
of having rights and duties.
Salmond defines a person as “any being to whom the law regards as capable
of rights and duties. Any being that is so capable, is a person, whether
human being or not and nothing that is not so capable is a person even
though he be a man”.

12. PERSON
NATURAL
REAL/NATURAL
(HUMAN BEING)
JURISTIC
IMAGINARY
(ARTIFICIAL)

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CORPORATION AGGREGATE
• A group of co-existing persons/a combination
of persons united together with a view to
promote common interest which is generally
the business or commercial interest.
• Includes all trading and non-trading
associations which are incorporated under the
relevant laws.
• The Board of Trustees, Ayurvedic and Unani
Tibia College, Delhi v. The State of Delhi
Another, 1962 AIR 458
CORPORATION SOLE
• It implies two persons to exist under the same
name. Corporation which is a creature of the
law and continues to exist though the human
beings changes.
• Example: Crown (in England), The Governor
of the Reserve Bank of India, the Registrar of
Supreme Court and High Courts etc.
• S Govinda Menon v. Union of India & Anr
1967 AIR 1274

14. THEORIES OF CORPORATE PERSONALITY
• Propounded by Savigny
• A corporation exists only as an outcome of fiction and metaphor.
• Absence of ‘Corupus’ as well as ‘Animus’. Its only an imagination of law.
FICTION THEORY
• Founder: Johannes Althusius (Germany); Profounder: the great German Jurist
Gierke
• A corporation is having all the characteristics just like A natural person.
• Has both ‘Corupus i.e. Common Seal’ as well as ‘Animus i.e. Will of the
corporation including individual will and group will.
REALIST / ORGANIC THEORY
• Supporters : Brinz (German Jurist), E.I. Bekker, Aloys and Demilius
• Corporations are treated as ‘persons’ for certain specific purposes.
• It became necessary to attribute personality to corporation for the purpose of being
capable of having rights and duties
PURPOSE THEORY

15. 15
THEORIES OF CORPORATE PERSONALITY
• Salmond, Savigny and Dicey are the main supporters
• Corporation as a legal person has great importance because it is recognized by the
state or the law
• Juristic personality is a concession granted to corporations by the state.
CONCESSION THEORY
• Ihring (German Jurist)
• Juristic personality is only a symbol to facilitate the working of the corporate
bodies
• A bracket is put around the members to form themselves as corporation who were
treated as one single unit
BRACKET THEORY/
SYMBOLIST THEORY
• Corporation, like an organism, has members (limbs) head and other organs.
• Corporations also have limbs in them and wills of their own and therefore, can
have legal rights and can be subject to legal duties and liabilities.
THE ORGANISM THEORY

16. 16
Salomon
v.
Salomon
Company is
distinct and
Separate from its
members.
There exists a veil
between company
and its members
c/a as Veil of
Corporation
Lifting
of
Corp.
Veil
Disregarding the
status of separate
Legal entity of a
company and
identifying the
realities that exist
behind the legal
façade.
Reasons
Personality of Co.
is used to commit
fraud /illegal or
improper acts
When the veil is
used to defeat the
provisions of law ,
against public
interest or to
defeat crime

17. 17
WHEN CAN THE VEIL BE LIFTED
Lifting of
Corporate Veil
Statutory
Provisions
Judicial
Interpretations

18. 18
STATUTORY PROVISIONS
Misstatement in Prospectus [S. 34 & 35]
Failure to return application money [S. 39]
Misdescription of Company’s name [S. 12]
For investigation of ownership of company [s. 216]
Fraudulent conduct [S. 339]
Inducing persons to invest money in company [S.36]
Furnishing false statements [S.448]; Repeated Default [S.449]
Liability for ultra vires acts
Liability under other Statutes

19. 19
JUDICIAL INTERPRETATIONS
• “Enemy” character
• Daimler Co. Ltd. v. Continental Tyre and Rubber Co. Ltd.,
[1916] 2 AC 307
DETERMINATION OF
CHARACTER
• Tax evasion/circumvention of tax obligation
• Dinshaw Maneckjee Petit, Re, AIR 1927 Bom 371
FOR BENEFIT OF REVENUE
• Gilford Motor Co. v. Horne, [1933] 1 Ch. 935
FRAUD OR IMPROPER
CONDUCT
• Shantanu Ray v. Union of India [1989] 65 Comp. Case
196 (Delhi)
TO PREVENT ECONOMIC
OFFENCES

20. 20
Contd.
• Workmen of Associated Rubber Industry Ltd. v. Associated
Rubber Industry Ltd. [1986]
TO PREVENT AVOIDANCE OF
WELFARE LEGISLATION
• Jyoti Limited v. Kanwaljit kaur bhasin [1987] 62 Comp. Case.
626 (Delhi)
TO PUNISH FOR CONTEMPT
OF COURT
• State of U.P. v. Renusagar Power Co., (1991) 70
Comp Cases 127
CO. ACTS AS AN AGENT FOR
ITS SHAREHOLDERS
• Formed for Evading legal Obligations
• Used for Illegal Purpose
• To determine Qualification or Technical Character
OTHER GROUNDS

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ADVANTAGES OF INCORPORATION
Independent
legal entity
Limited
liability
Perpetual
succession
Transferability
of shares
Infinite
membership
Mobilization
of resources
Ease in control
and
management
Separate
property

22. 22
Formalities and
Expenses
Loss of Privacy
Loss of Control
from Ownership
Detailed winding up
procedure
Greater public
accountability
Possibilities of
Fraud
DISADVANTAGES OF INCORPORATION